For the past few years, the concept of blockchain has been almost synonymous with the adrenaline rush of the cryptocurrency raise and speculation. In a world where the global-wealth has pretty much been “cordoned off” by a small super-elite, cryptocurrencies and tokens provided perhaps the only means to realize wealth outside the traditional financial systems.
But can blockchain have a social impact? Is it possible to derive some social good from the implementation of blockchain technology and other distributed ledger technologies?
One of the interesting aspects of the developments in blockchain and other DLTs is that it has not taken a linear path. The use-case was supposed to be all about launching cryptocurrencies and watching them grow their market cap to generate crypto wealth for early speculators.
But there have been lots of unintended positive consequences. One is that many innovators have found use-cases that extend beyond cryptocurrencies into other areas that have so far had good social impact. The most enthusiastic blockchain adopter has been the healthcare sector where there is the need to trust the authenticity of not just data but also life-saving drugs and interventions. An important feature of a blockchain system is that it engenders trust and this makes it a valuable tool in an area of application such as healthcare.
As far as social impact goes, blockchain and various DLTs have had a transformative impact in various social good areas such as governance, democracy, lowering the costs of transaction fees, aid and philanthropy, land rights questions, energy, environment and financial inclusion among others.
Blockchain breaks the traditional organizational models that are based on the centralization of authority. In traditional models, not only is the “digital truth” or databases centralized, but there is also an intermediary who handles and certifies records and transactions.
By adopting a peer-to-peer model along with cryptographic techniques, blockchain systems eliminate the need for this centralization thereby making it possible to create independent digital databases or ledgers that are not only transparent among all participants but are also distributed across a network of computers and participants.
Through a process called mining or staking that is underpinned by Proof of Work, Proof of Stake or Smart Contracts, it is possible to verify and store each and every transaction in a block and then add the verified blocks to a chain of verified transactions. These records are not only stored but are also secured through cryptographic techniques making it impossible to alter or remove them. This chain of transactions is also updated and stored in all the computers that form part of the blockchain network. All transactions can therefore be processed directly and identified through secure digital signatures.
How Blockchain Will Power Financial Inclusion
One area of great promise when it comes to blockchain application is its potential to foster financial inclusion in previously financially excluded communities. Some 2 billion adults globally lack access to reliable and affordable financial services. That financial exclusion means that you have billions who can’t take credit, take short term loans, purchase insurance and other financial transactions that many of us take for granted. As a result, this category of population is vulnerable to pawnbrokers, shylocks, cash-under-the-mattress and other informal financial systems, factors that only exacerbate their poverty and financial exclusion.
Financial inclusion is key to economic progress. People who are part of the financial system are able to access credit and save money. At the end of the day, the financial system benefits from the inclusion. But how can blockchain system bridge the gaps left in the current financial system?
The biggest problem when it comes to financial inclusion is that of identities. People who are excluded from the system are invisible to the system. The banks, building societies, insurance companies or mutual funds do not know about their existence. Onboarding these billions into the global financial system is also a costly and logistically nightmarish affair. Global financial institutions expect the unbanked to take the initiative and join the system. Without identities, the “invisible” financially excluded cannot open and operate accounts.
Through blockchain, it is possible to easily create valid identities over the internet. It is possible to create secure formal identification documents through a blockchain implementation which can subsequently be used to access financial services in a blockchain-powered ecosystem.
Blockchain also solves the identification problem in other ways. If financial systems implement blockchain technology in their customer ID, they can easily reissue identity documents as well as data where customers have lost critical identification such as driving licenses or passports. This can be valuable in situations where you are facing human displacement such as illegal migrants or refugees.
This is already happening. In some countries, blockchain technology is being applied to resolve financial inclusion issues facing unidentified people. Microsoft has partnered with Accenture and the UN to create blockchain-powered legal identification for the more than 1.1 billion people globally who lack official identification. IBM is also working on a blockchain-powered Digital Identities project while Finland has created a blockchain-powered digital money system for refugees.
Other examples of blockchain-based financial inclusion tools include the following:-
- BanQu: This is an economic identification technology platform that can be used to create a personal digital profile with personal and financial records among others. This blockchain-powered profile can subsequently be accessed and accepted by various financial institutions using the platform as a legitimate identification tool.
- Regalii: This is a blockchain-powered refugees and migrant mobile payments platform that allows immigrants to pay bills for their families through SMS from virtually anywhere.
- Ripple: This is also a blockchain-powered tool that makes it possible to send money to virtually anywhere in a currency of your choice. Users simply put money into the Ripple wallet via a compatible gateway.
Blockchain solutions can also be purpose-built and integrated with external systems so as to reduce instances of fraud and errors in the financial systems when it comes to the delivery of financial benefits to the financially excluded. A secure and trusted financial system will invariably restore trust and attract the financially excluded.
One of the top reasons why the global financial system is so hated is that it skims off too much value in fees and charges from transactions. On the other hand, blockchain systems allow peer-to-peer transfers of value over the internet almost instantly but at a very low cost. This technology can therefore be leveraged to build money or asset transfer platforms that will be both accessible and affordable. In the future, blockchain money transfer systems will not only reduce the cost of processing transactions but also the cost of sending money both locally and internationally.
The transparency and unhackability of blockchain platforms such as Bitcoin along with the fact that they easily lend themselves to the transmission of value between individuals or entities without the “interference” of some costly corporate intermediaries makes them an ideal tool for financial inclusion. Because of this, they are regarded as promising tools for opening new avenues for global financial inclusion for the more than 2 billion adults who are currently locked out of the global financial system.
Blockchain and the Future of Democracy
Part of the arsenal that is anchoring global democracies is good technology. In the wake of the “Russian hacking” claims following the 2016 US election and Brexit, there is the fear that democracy could be undermined not by terrorists or propaganda from totalitarian states, but simply by sabotaging the technology that ensures the integrity of the vote. If an election tally can be manipulated electronically, then the very foundation of a democracy-one man vote and the freedom to choose- will have been destroyed.
One idea that has been floated around is that of blockchain voting. The core anchors of blockchain systems that make them trustable is that they are transparent, immutable (impossible to alter), decentralized and largely unhackable. Because blockchain systems are based on peer-to-peer networks rather than a centralized database, hacking them can be a nightmare and this can largely guarantee the integrity of electoral systems.
An electoral system that is structured on blockchain will be highly transparent with no single intermediary managing the electoral data. Once a vote has been cast and recorded, it will not be possible to change it due to the blockchain mechanism. All the data will be verified and publicly available to everyone while the voter’s identities will be kept secret using cryptographic techniques.
Blockchain and Open Governance
Enforcing organizational governance processes through smart contracts
There are several practical use-cases for blockchain in open governance. Open governance is about creating transparent governance systems that help engender public trust in governance processes both in the government and organizations. Because of its default features of transparency, immutability and its decentralized nature, blockchain can be a potent technology for fostering open governance.
Certain governance systems can be moved to blockchain such as the tendering processes. One of the key features of blockchain is smart contracts and these can be used by organizations and governments to ensure a fair and transparent tendering process that helps select the best bidders for projects. A smart contract can contain a list of instructions on how tender bids are to be evaluated in the form of a computer code. This smart contract is subsequently deployed in the blockchain and cannot be altered. Organizations can release tenders as smart contracts which are subsequently downloaded from the blockchain by bidders. Bidders can then review the tender and submit encrypted bids.
Using Blockchain for a Smarter Energy Grid
Blockchain can help cut the red tape and solve a host of data management problems when it comes to energy distribution. One of the potential applications of blockchain technology in the renewable energy industry is in keeping track of the renewable energy certificates.
More ambitious blockchain applications in the sector could see the technology transforming the architecture of the grid to make it more efficient. One good example is the Australian renewable energy blockchain startup Power Ledger.
Power Ledger is a blockchain platform that enables users to trade energy with one another by leveraging the peer-to-peer architecture of the blockchain systems.
The peer to peer approach makes blockchain highly suitable for this kind of application. Through blockchain, it is possible to create an automated record of the renewable energy generation and consumption that is not only transparent but also auditable. Such a transparent and efficient system not only results in energy savings but help reduce costs while cutting down on wastage with an overall positive impact on the climate.
Blockchain systems can be particularly relevant for the small distributed energy generators where it could touch off on the efficiency of the grids and help transform them into modern futuristic electricity grids. The technology could help the owners of these grids to maximize on the value of their investments. In traditional grids, it takes almost three months for energy generators to be paid while in a blockchain system, generators receive payments instantly through the system.
Blockchain and Land Rights
In countries where the land registry is not so sophisticated and where there is widespread corruption and weak institutions that enforce the rural of law, there is widespread land fraud and land grabbing that costs the economies billions of dollars and erodes investor trust. Buyers are not sure about who legally owns the land and the landowners are not even sure they legally own the land.
One solution that has been suggested is the use of blockchain technology in creating digital land registries that are foolproof. It is possible to create land titling and store critical data such as contracts in blockchain that are almost 100% unalterable.
Blockchain transactional records are immutable and therefore trustable. The records are also permanently interlinked making it impossible to forge or tamper with them. A blockchain land registry can capture every transaction involving a piece of land thereby ensuring 100% transparency and traceability in land dealings. The transparency factor means they can be seen by anyone which makes validation a lot easier. When implemented through smart contracts, it can make for a very reliable land registry system.
Blockchain and Creative Licenses
Blockchain will revolutionize the way musicians and artists sell their merchandise and manage the royalty from their work. Managing music royalties is often a complex affair. You have the artists, labels, vocalists, music producers and all the other players that are entitled to the music royalties and you have to figure out how to pay everyone their share expeditiously.
In the era of digital music sales, it’s the music metadata which has the information on the rights holders and determines what is paid to who. The metadata is not 100% foolproof and may be incomplete or missing some crucial information. Blockchain technology can be used to solve the inefficiencies in music royalty payments. By implementing smart contracts in blockchain, you can code in the proportion of revenues that will go to each of the rights holders. All the parties are also able to receive their share of revenues almost instantly instead of waiting for months for their payments to be processed. This can also be applied in other creative endeavors outside the music industry.
Blockchain in Philanthropy
The blockchain revolution has found its way into the world of philanthropy and one of the coolest new concepts is the idea of crypto-philanthropy. Many organizations are already leveraging cryptocurrencies and blockchain technologies for philanthropic pursuits.
At the most basic level, charities are now accepting donations through cryptocurrencies such as Bitcoin and Ethereum which has created new revenue streams for many nonprofits. At deeper level, some charities and foundations are implementing blockchain technology in very innovative ways to increase the impact of their projects.
There has also been the emergence of the distributed autonomous foundations that make grant or financial disbursement decisions based on the votes or stakes of token holders in a blockchain network.
The transparency and immutability of blockchain could also restore trust in philanthropy thereby leading to more philanthropic engagement from the general public. Donors typically shy away from giving due to the fact that charities are spending too much on administrative overheads and too little on actual programs that change lives. If decentralized and autonomous blockchain systems can cut down on the overheads, there will be more incentive for donors to give. The future will see some charities even launching their own cryptocurrencies that could create new sustainability models.
Blockchain technology is certainly still in flux but there are certainly powerful and innovative use-cases that will have a massive social impact on our world if well implemented.